STRATEGIC
COMPENSATION
A Human Resource Management Approach
Chapter 5:
Person-Focused Pay
5-1
Person-Focused Plans
• Rewards employees for acquiring jobrelated
– Competencies
– Knowledge
– Skills
• Two main types
– Pay-for-knowledge
– Skill-based pay
5-2
Competency-Based Pay
Programs
• Pay-for-knowledge: reward managerial,
service, or professional workers for
successfully learning specific curricula
• Skills-based: used mostly for employees
who do physical work, increases these
workers’ pay as they master new skills
5-3
Competency-Based Pay
Programs
• Reward employees for improving or
acquiring new skills/knowledge
• Horizontal skills: skills at the same level
of responsibility or difficulty
– Ex: clerical employees of a retail store trained
to perform record-keeping tasks
• Employee attendance records
• Schedule salesperson’s work shifts
• Master the use of office supplies for reordering
5-4
Pay Programs (cont’d)
• Vertical skills: skills that are traditionally
considered supervisory
– Scheduling, coordinating, training, leading
others
• Depth of skills: level of expertise or
specialization an employee possesses
– HR professionals specialize in compensation:
•
•
•
•
Job evaluation
Salary survey analysis
Market pay system designs
Incentive (merit) pay system design
5-5
Vertical Skills
• Works well for work teams
– Service industry
– Manufacturing industry
•
Employees
– Learn functional skills
– Perform managerial tasks
5-6
Competencies
• Uniquely combined characteristics of the person that
enables employees to fulfill job requirements well
– Foundational competencies: workplace ethics, punctuality,
academic quals,
– Pers Eff:
• Core competencies are derived from company’s
strategic statements
– Industry related
– Industry wide
• Occupation related competencies
5-7
Reasons for Adoption
Reasons for adoption
– Removes entitlement label
– Connects pay to job-related abilities
– Increases employee autonomy
– Jobs require new and different worker skills
– Technological innovations
– Increased global competition
5-8
Person-Focused Pay Program
Models
• Stair step: the steps represent jobs from a particular
job family that differ in terms of complexity;
Trainee (contractual part) OJT, Cl room trg  Tech-I 
Tech-II
– core electives: Example of tech 1, tech 2
– Optional electives:
• Skill block: applies to jobs within the same job family,
but skills do not necessarily build on one another
5-9
Person-Focused Pay Program
Models (cont’d)
• Job-point accrual: encourages
employees to develop skills and learn to
perform jobs from different job families
• Cross-departmental: promote staffing
flexibility by training employees in one
department with critical skills they would
need to perform effectively in other
departments
5-10
Stair-Step Model
• Jobs from same job family
• Jobs differ in complexity
• Higher the step, greater the skills
• Companies use separate models
• Models designed to match jobs
5-11
Skill-Block Model
• Applies to jobs in same job family
• Employees expected to progress to
increasingly complex jobs
• Skills may not build on one another
• Emphasizes horizontal and vertical skills
5-12
Job-Point Accrual Model
• Applies to jobs from different job families
• Creates organizational flexibility
• Points are assigned to various skills
• The higher the number of points, the
higher the core compensation level
5-13
Cross-Departmental Model
• Employees develop skills usable in other
departments
• Helps manage sporadic, short-term
staffing shortages
• Helps meet seasonal fluctuations
– Ex: Holiday shopping rush
5-14
Contrasting Person-Focused Pay
With Job-Based Pay
Feature
Person focused
Job based
Pay level
determination
Market basis for skill
valuation
Market basis for job
valuation
Base pay
Awarded on how much an
employee knows or on skill
level
Awarded on the value of
compensable factors
Base pay increases
Awarded on an employee’s
gain in knowledge or skills
Awarded on attaining jobdefined goal
Job promotion
Awarded on an employee’s
Awarded on exceeding
skills base and proficiency on job performance
past work
standards
Key advantage to
employees
Job variety and enrichment
Perform work and receive
pay for a defined job
Key advantage to
employers
Work scheduling flexibility
Easy pay system
administration
5-15